Howard faces dilemma with mixed-use development

Plans for Howard University's proposed mixed-use development project, Howard Town Center, have been dragging on for years. The university is making the tough call to hold out for the ideal project rather than build what it can in this investment climate.

An earlier design proposal. Image from DMPED.

Troy Stovall, Howard University's chief operating officer, revealed Thursday that the difficulty in financing the project is not due to the retail and supermarket component, but due to the number of apartments slated for the site.

Rather than letting the developer proceed with building the garage, supermarket, retail shops and half the number of apartments originally planned, Howard wants the full project, including all of the apartments built into project at the same time.

When asked on the status of the retail component, Mr. Stovall said that the developer has received several letters of intent from supermarkets interested in the space. The problem, though, lies upstairs. The banks, Mr. Stovall stated, are less convinced about the financial viability of building so many apartments on lower Georgia Avenue.

U street developer JBG, however, has recently purchased several properties within a few blocks of the Howard Town Center site. JBG and Howard's banks clearly differ in confidence in the area's potential.

However, to abide by the banks' requirements to reduce the number of units reduces the viability of the area's retail revitalization. More residents, after all, means more potential customers, and thus more chances for success along Georgia Avenue.

It's certainly debatable as to whether the delay in the arrival of a grocery store is worth the slowing of Georgia Avenue's revival. One the one hand, Howard's desire for delayed gratification will make the avenue's retail revitalization more durable. On the other hand, holding out for the ideal project postpones a catalyst for the avenue's revival.

Eric Fidler has lived in DC and suburban Maryland his entire life. He likes long walks along the Potomac and considers the L'Enfant Plan an elegant work of art. He also blogs at Left for LeDroit, LeDroit Park's (only) blog of record.

Comments

So why don't they move forward with development of the retail component, with a smaller number of housing units on top, but design the building so as to either maximize air rights on adjacent plots, or build more units on top when the market allows? I'm thinking of how several stories of office space were added to the top of the Hecht's (now Macy's) building downtown a few years ago.

I work for a bank and they're lying or just going about it wrong. Major banks and insurance companies will fall all over themselves to finance this if it's adequately capitalized (75% loan to value/cost). With rents in that area what they are, it makes it for a very easy pro forma. I think they must be working with small or maybe exclusively minority-owned banks, because what they say does not match reality. And retail is absolutely a greater risk than filling apartments in a city where there is record-low vacancy and record-high rents. It is more uncharted territory on GA Ave in terms of retail (though they did recently land a Potbelly).

My guess is that the university and the second-rate developer they awarded the RFP to aren't willing or able to put nearly enough skin in the game to make this viable, or maybe the developer is a complete amateur.

Just to let the readers know, multifamily rental is the easiest type of financing you can get today. Condo and spec office are the toughest. Retail is somewhere in between, but trending the right way.

The rental market in general is doing well right now and the general area is in demand, so I don't understand why the banks would be so hesitant - can you find out more information? Is Howard tied to a specific bank/financier?

All the more perplexing since Howard got the site practically for free from the city to do with as it pleases--and it still can't get it off the dime. They have sat on it for years. Sadly, Howard has historically been one of the biggest generators of blight in the neighborhood. They sat on the Metro properties between 7th and 9th on Florida for years as well, before Metro finally wised up. Why anyone would think a university would make a competent developer is anyone's guess.

Given how much gentrifiers love supermarkets, you've got to wonder if that $100M being used for streetcars might be better used for urban public markets. You know, like, Eastern Market.

And like the others, having a hard time thinking it is the rentals that is keeping the project from getting financing. I could see the developer wanting to wait until he can just put in condos again....

@rt - I completely agree. I work in real estate finance and I know there would be several big lenders that would be all over this type of investment. You really can't go wrong with building multi-family in a core area of Washington, DC. Like you said, vacancy is way down and rents are way up. Just look at Progression Place at 7th & S...that site is already under construction, meaning they had to lock in financing a year ago when the market was not as good.

Howard needs to step up to the plate and find a good mortgage broker that can get the financing they need. It really makes me think that Howard has no idea what they're doing...yet again.

I don't work in real estate finance but agree with the commenters above. Retail is the most fraught with peril these days.

I made many of the same kinds of arguments with regard to Foulger Pratt at "the Walmart site" on Georgia Ave. and planning for mixed use, although that doesn't have the subway station proximity, which makes putting housing there a bit more problematic.

But the issue was that Foulger Pratt isn't willing to bring in financial partners for that particular site, therefore limiting what is possible. (The report is available on the ANC4B website.)

Note though with supermarkets that it is not a "gentrifier" issue. It's a walkability, livability issue. How are people with money any different from the people espousing food desert arguments for wanting a supermarket?

That being said, as was discussed at a DC Ec. Partnership meeting a few years ago, DC is getting to the point of being overstored in supermarkets and every project wants one, and there are only so many companies in the market. Plus, with Walmart's entry, that's going to make supermarkets more wary about committing to locations anything less than A, especially in the Georgia Ave. corridor. Look at the number of stores Safeway and Giant have closed in PG County after Walmart and now Wegmans have opened--at least 5 stores over the past few years.

I don't know if Howard U. participates in the university land development interest group organized by the Lincoln Land Institute, but they need to...

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